Wasserstein Robust Market Making via Entropy Regularization
Mathematical Finance
2025-03-07 v1 Trading and Market Microstructure
Abstract
In this paper, we introduce a robust market making framework based on Wasserstein distance, utilizing a stochastic policy approach enhanced by entropy regularization. We demonstrate that, under mild assumptions, the robust market making problem can be reformulated as a convex optimization question. Additionally, we outline a methodology for selecting the optimal radius of the Wasserstein ball, further refining our framework's effectiveness.
Cite
@article{arxiv.2503.04072,
title = {Wasserstein Robust Market Making via Entropy Regularization},
author = {Zhou Fang and Arie Israel},
journal= {arXiv preprint arXiv:2503.04072},
year = {2025}
}